Top winner and loser

He warns: "A company planning to raise money via the stock market will employ a team of advisers to make that company look as attractive as possible. You are dealing with a sales pitch at the very highest level."

Of course, the past year has also provided its share of successes.

David Kuo points to Jupiter, an investment company, and Supergroup, a sports fashion clothing chain whose brands include the small-but-growing Superdry label.

Investment specialist Jupiter Fund Management priced its shares at the low end of hopes at 165p and saw its shares rise 15%. They are now an impressive 86% above their June float price.

Supergroup did even better, issuing at 500p, jumping 8% on the first day, and trading now a staggering 153% above the issue price.

He explains their success by pointing out that Jupiter's business is the markets and if they do well, so will it. Supergroup, he says, is a simple case of underpricing.

Preparing a company for a stock market listing involves a host of professionals - lawyers, investment bankers, accountants and brokers - but is plainly not an exact science.

Some companies decided in 2010 to avoid the thorny process altogether and, having planned to float, pulled out.

Since April, 55 companies decided they would not list after all, including the clothing chain New Look, and the owners of Madame Tussauds and the London Eye, Merlin Entertainments.

Image caption
Will the fashion chain New Look brave the stock market in 2011?

'Lipstick on a pig'

How does a small investor decide whether to get involved?

Darius McDermott says this is not easy: "Even as someone close to the market, I would not feel qualified to assess whether a company was worth what the official IPO document says. I would go for specialist help."

David Kuo is even more blunt: "The simple answer is, 'You can't.' Investors are working with limited financial information and flotation documents are designed to put lipstick on a pig."

The standard recommendation is that even with specialist advice, you need to take a five-year view and have a high threshold towards risk.

Darius McDermott says it is possible to do well: "If you know the management of a smaller company, for example, you have personal knowledge and you can find some real gems."

But going by the performance of the crop of 2010 issues, you have been warned.